Austin 2Q 2024 Market Report

MARKET SNAPSHOT

AVERAGE RENT

$1,561 2Q 2024

2Q 2024 RENT CHANGE

-6.2%

OCCUPANCY RATE

91.1% 2Q 2024

ANNUAL OCCUPANCY CHANGE

140 BASIS POINTS

QUARTERLY DEMAND

6,366 [YTD: 10,882]

QUARTERLY COMPLETIONS

7,128 [YTD: 15,940]

KEY TAKEAWAYS

  • With roughly 16,000 units delivered in the first half of this year and another 9,300 units scheduled for completion in the latter half, 2024 will see the highest annual completion level in recent memory. However, relief is in sight as completions are forecasted to drop to around 11,700 units by 2025, aligning with the historical average.

 

  • The continued influx of new units in 2024 will likely moderate Austin’s rent growth for a second consecutive year, particularly downtown, where high-end properties face intensified competition. While urban submarkets struggle with excess supply, suburban areas will likely see rent growth turn positive by the end of the due to less deliveries relative to urban submarkets.

 

  • Construction starts slowed substantially from 11,400 units in the first half of 2023 to 1,800 units in the first half of 2024. This slowdown provides much-needed breathing room for demand to catch up with the supply overhang, bringing the dynamics into balance by mid- to late 2025.

Supply & Demand

2Q 2024

6,366 Units [YTD: 10,882]

QUARTERLY DEMAND

7,128 Units [YTD: 15,940]

QUARTERLY COMPLETIONS

Annual Demand vs Completions

Demand Trends

In the first half of 2024, Austin experienced strong multifamily demand, with renters absorbing over 10,800 units. This surge in demand is primarily driven by robust economic growth and inbound migration, especially to suburban areas like Georgetown-Leander and Southeast Austin, which offer lower rents and high-quality amenities​​, accounting for 30% of the quarterly absorption.

Construction Trends

Austin’s multifamily market contains over 31,900 units under construction as of mid-2024. Development activity is concentrated in urban core areas like East Austin (3,137 UC) and Downtown (2,548 UC), as well as suburban areas like Norh Austin (3,323 UC), and Northeast Austin (3,393 UC). By the end of the second quarter of 2024, 15,940 units have already been delivered, with an additional 9,300 units expected to be completed by year-end. This positions 2024 as the peak of unit deliveries in this cycle, which will continue to exert downward pressure on occupancies and rents in the near term.

Occupancy & Rent Trends

OCCUPANCY TRENDS

The narrative in Austin remains unchanged as an unprecedented influx of new supply continues to pressure occupancy rates lower each consecutive quarter, a trend that began in 2022. As of the second quarter of 2024, average occupancy in stabilized buildings (excluding lease-up properties) has fallen 140 basis points to 91.1%. However, it is important to note that while the influx of new supply has driven the recent narrative, demand has been robust in recent quarters, particularly in suburban areas like Georgetown-Leander and Southeast Austin. These areas benefit from accessibility, affordability, and growing job opportunities, indicating market resilience and a likely bounce back in fundamentals once the supply overhang is absorbed by renters.

Despite most Austin submarkets showing annual declines in occupancy rates, Riverside, Downtown Austin, and Hill Country posted positive year-over-year changes. Far North Austin and Caldwell County reported strong occupancy levels above 95%, highlighting varied submarket performance. Favorable demographics and proximity to employment hubs support ongoing development, though high borrowing costs have slowed new starts, potentially stabilizing vacancy rates by 2025.

RENT TRENDS

In the first half of 2024, Austin’s rental market experienced a significant decline in effective rents, with an annual decrease of 6.2% in the second quarter, bringing the average monthly rate for new leases down to $1,561. The primary cause is the influx of new units across the Austin metro. Over the past two years, the market has seen a sustained increase in new stock, with more than 27,000 units added in just the past 12 months. This compares to the absorption of 13,600 units during the same period, marking one of the widest margins between annual net deliveries and annual net absorption in the market’s history.

Owners of Class A assets are facing the most intense competition, resulting in weakened pricing power. Every submarket in Austin is experiencing declining effective rents, ranging from a modest contraction of -0.5% in Central Austin to a steep decline of -9.0% in the Buda-Kyle submarket.

$2,843

Average Monthly Mortgage Payment

$1,561

Average Monthly Rent

Submarket Rent & Occupancy

Submarket Construction Pipeline

Sales Activity

Through June 2024, the total value of individual conventional multifamily transactions in Austin, TX, reached approximately $558.6 million, representing a 46% decrease compared to the same period the previous year. The number of properties traded also saw a significant decline, dropping by 55% with only 12 properties sold. Private buyers have been the primary drivers of acquisitions this year, while institutional buyers have largely sat on the sidelines, making up only 6.1% of the buyer market in Austin this year, compared to the five-year average of 29%. However, recent major acquisitions by KKR and Blackstone suggest that institutional players might be ramping up their acquisition plans in the coming quarters. Both firms have indicated a belief that the multifamily market has likely reached a bottom, hinting at a potential increase in institutional investment soon.

  • City of Austin
  • Terracap Mgmt Corp
  • Sterling Equities
  • SPI Advisory
  • JCI Residential
  • Thompson Realty
  • Wood Partners
  • Cortland

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME

$ 0 M

YTD TRANSACTION VOLUME

0 %

Y-O-Y CHANGE

0 YTD

INDIVIDUAL TRANSACTION COUNT

$ 0 k*

PRICE PER UNIT

0 %

ANNUAL PPU CHANGE

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Austin's Fastest Growing Renter Demographic

Austin-Round Rock, TX Metro Area

Under 35 Years
35 to 44 Years
45 to 54 Years
55 to 64 Years
65 to 74 Years
75 to 84 Years
85 Years & over
1.5%
-0.5%
-0.8%
-0.6%
0.1%
0.1%
0.1%

The group of renters under 35 years old is the fastest-growing segment in the Austin metro area since the pandemic, with a 1.5% increase from 2019 to 2022. This trend points to an escalating demand for rental properties that appeal to younger Americans.

Sources: U.S Census; ESRI

Market Outlook

Despite cooling fundamentals over the past two years, Austin’s multifamily market continues to experience healthy demand driven by economic vigor and a thriving job market. At the close of the first half of 2024, nearly 32,000 housing units were under construction, more than double the pre-pandemic average. So far this year, close to 16,000 units have been delivered, with another 9,346 units expected to be completed by year-end. This influx is likely to pressure occupancy and rents for the remainder of the year.

However, declining occupancy rates, stringent underwriting standards, and rising capital costs have led many developers to shelve projects over the past year. Construction starts slowed substantially from 11,400 units in the first half of 2023 to 1,800 units in the first half of 2024. This slowdown provides much-needed breathing room for demand to catch up with supply, likely materializing by mid to late 2025. By then, the dynamic is expected to shift, with demand applying upward pressure on rents and occupancy.

Sources: Costar; ESRI; MSCI; U.S. Census Bureau; Yardi Matrix.

To Gain Further Insights Into The Austin Market Please Reach Out To Our local Team

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Michael Watson

Director of Revenue Production
Michael Moffit

Michael Moffit

Managing Director
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Mark Diebold

Senior Director
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Alex Thompson

Associate Advisor
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Tyler Salter

Associate Advisor
Nathan-Allison

Nathan Allison

Associate Advisor
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Thomas Rodriguez

Associate Advisor
Gavin Cooper

Gavin Cooper

Associate
Alex Blagojevich

Alex Blagojevich

Executive Managing Director / Co-Founder
Michael-Sullivan

Michael Sullivan

Executive Managing Director / Co-Founder

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